Accounting - Variance Analysis
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What does the variance analysis tell the reader in quantitative terms?
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Hi there,
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<br>It tells the reader the percentage change in a specific account from year to year.
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<br>Other info:
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<br>What is a variance?
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<br>Let's start with the basic concept of a variance. It is simply the difference between what you expected and what you really received. If you expected something to cost $1 and it, in fact, cost $1.25, then you have a variance of $0.25 more than expected. This, of course, means that you spent $0.25 more than what you planned.
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<br>Materiality
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<br>When you are calculating your variances, take materiality into consideration. If you have a variance of $0.25, that isn't a big deal if the quantity produced is very small. However, as the production run increases, then that variance can add up quickly. Most projects generate tons of variances every day. To avoid a tidal wave of numbers that are inconsequential, ...
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